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South Korea Finance Watchdog Probes FX Markets for Illicit Crypto Transactions

2 mins
Updated by Kyle Baird
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In Brief

  • Financial regulators in South Korea are probing foreign-exchange transactions at commercial banks for the illicit use of cryptocurrencies.
  • Since some of the transactions involved crypto exchanges, authorities are checking for any links to money laundering or currency speculation using crypto assets.
  • By scrutinizing the transactions, the regulator is identifying whether laws on money laundering and foreign-exchange trading were broken.
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Financial regulators in South Korea are probing foreign-exchange transactions at commercial banks for the illicit use of crypto.

Since some of the transactions involved crypto exchanges, authorities are checking for any links to money laundering or currency speculation using crypto assets, according to an anonymous senior Financial Supervisory Service official. While he neglected to identify the exchanges in question, Shinhan Bank was revealed as one of the lenders under probe. 

By scrutinizing the transactions, the regulator is looking into whether laws on money laundering and foreign-exchange trading were broken. Regulators have also collaborated closely with the country’s prosecutors on the probe.

Earlier, Yonhap News Agency reported that Woori Bank had been involved in a transaction of about 800 billion won ($611 million) on June 23. Meanwhile, Shinhan Bank was also involved in a trade of 1 trillion won on June 30. 

The report was confirmed by an FSS spokesperson, while a Shinhan Bank spokesperson confirmed that a regulatory probe is underway. However, the latter said they could not reveal the exact size of the transaction and its relation to crypto exchanges, which could only be disclosed at the investigation’s conclusion.

Following the collapse of the TerraUSD stablecoin, spurred financial authorities in South Korea to launch “emergency” inspections of domestic cryptocurrency exchanges. South Korea’s Financial Services Commission (FSC) and the FSS requested information from local cryptocurrency exchange operators on transactions linked to TerraUSD and Luna

This included data related to the trading volumes, their closing prices, and the number of relevant investors. The exchanges’ countermeasures to the market crash and analyses on what caused the collapse were also solicited.

Later, the FSS opened investigations into payment gateway services working with digital assets. The FSS requested 157 payment gateways to provide information about their services involving crypto, disclosure of digital assets, and their plans. However, the FSS reported that only 6 payment gateways held digital assets. The request came only a few days after the government announced the launch of a Digital Assets Committee.

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Nicholas Pongratz
Nick is a data scientist who teaches economics and communication in Budapest, Hungary, where he received a BA in Political Science and Economics and an MSc in Business Analytics from CEU. He has been writing about cryptocurrency and blockchain technology since 2018, and is intrigued by its potential economic and political usage.
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